The pound is expected to be one of the strongest performing major currencies over the next year, according to a Wall Street investment giant, as a tight jobs market risks slowing down the pace of interest rate cuts by the Bank of England.

Bank of America said sterling is on track to hit $1.41 by the end of 2025, having touched a two-year high of $1.323 last week.

The pound, which is worth about $1.313 today, will be boosted by “above trend growth” in Britain’s economy.

Sterling is expected to reach $1.35 by the end of this year as a potential tightening of the UK jobs market slows down the pace of interest rate cuts by the Bank of England, with the next cut expected in November by Bank of America.

Bank of America strategist Adarsh Sinha said: “We look for four quarterly cuts in 2025, and two cuts in 2026 for a 3.25pc terminal rate by mid-2026.

By contrast, he expects the US Federal Reserve to cut interest rates twice by the end of this year, four times this year and twice in 2026.

He added: “With activity remaining solid and inflation coming in just a little stickier than the Fed would like, we do not see the need for super-sized or accelerated (once per meeting rather than once per quarter) rate cuts.”

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